Developing Scalable Teams and Cultures in Real Estate With Kerri Davis, Real Finds Podcast #22 Transcript
Gordon Lamphere: Hi, I’m Gordon Lamphere with the Real Finds Podcast, the podcast series where we interview key entrepreneurs, scientists, and activists shaping the real estate industry and, as a result, our world. Kerri Davis is founder and CEO of Fortress, a revolutionary software company shaping the future of property management. In her role as president of Elmington’s property management division, she was dissatisfied with current proptech offerings and set out to make a better platform. On the podcast, we discuss scaling real estate businesses, effective property management, and the future of property technology. It’s well worth a listen. Kerri, thank you so much for hopping on the podcast today.
Kerri Davis: Gordon, thank you so much for having me. I’m excited to be here.
Gordon Lamphere: I wanted to start by asking you to introduce yourself to our audience. You have a very unique product and a unique way of coming at it.
Kerri Davis: Happy to. I joined the Elmington family of companies about ten and a half years ago as an accountant and an attorney. Fast forward, and now I’m the CEO and co-founder of a platform called Fortress. I start with joining Elmington because that’s really why I’m where I am today. When I joined, it was just the four partners, and I was their first full-time employee. We had just started to get into property management. A couple of years later, we found ourselves managing a 5,000-unit property management company, and we were struggling with it. My business partners asked me to step in and figure out how we could and should scale that company and create success. That was the catalyst for what eventually became Fortress, a property management software I’ve built with my team over the past few years to enhance Elmington Property Management’s operations and help them scale from about 5,000 units under management to the 32,000 they’re at today. Today I still get to be a partner in Elmington Property Management and help that business every once in a while, but I focus exclusively on running Fortress and bringing it to the larger property management market.
From Law School to Iraq to Nashville
Gordon Lamphere: We’ll come back to Fortress, but every lawyer I meet who leaves law as their primary venue fascinates me, because I did the same thing. What took you from being a lawyer to property management and then property technology?
Kerri Davis: It’s an interesting story. I went to law school at Case Western in Cleveland, Ohio, and chose that school for its international law program. I wanted to join the military and did, for a short period, to be a JAG officer. I spent two years contracted with the military, and unfortunately I spent my second summer of law school training at Fort Knox, where I burned my feet. Not a fun experience, and everything you’ve heard about military medicine is true. I ended up receiving a release from my contract because of the physical therapy I had to go through. But my husband was working for a Department of State contractor in Iraq at the time, and they had an open position managing their accounting, which is my undergrad background. I thought, I’m not going to be a JAG officer, but this is an awesome opportunity to share with my husband, travel a little, experience some of the world, and hopefully be a helpful steward. So I spent a year in Iraq with him. When we came back, we bought a home in Nashville without knowing anyone here, and I used my accounting background for a while. Then I met the Elmington team. In all honesty, I thought they were a little crazy at first: four guys in a really small office who didn’t know exactly what they were going to do. But what I did know is that they were going to be successful, and for me that’s what it’s all about, finding the right culture and the right people. Interestingly, I’ve never practiced law since getting my license, and I don’t think I ever will. I’ve loved running businesses and leading teams. Very lucky, but an interesting story.
Gordon Lamphere: Law school doesn’t usually line up with accounting in Iraq. You touched on the team you joined being lean and hardworking with a great culture, and we often talk on this podcast about how a lean team with excellent culture is one of the fastest paths to real estate success and wealth. How did you identify the team, and what was it like?
Kerri Davis: Everything you said is so true. A sidebar: the times we’ve struggled most at any of the companies in Elmington’s world are when we’ve had to scale. You know you’ll lose a little efficiency in scaling, but a lot of times it completely changes the structure, the process, and the output. You’d think adding resources and team members would be additive, but we’ve really struggled with it. We’ve always found our footing, but it’s been hard. From the beginning, finding the Elmington partners and realizing they didn’t know exactly what they’d be doing, they were investing in commercial real estate, some multifamily, a few affordable rehabs, looking at developing affordable, and at the time they were in waste management and even thinking about medical device supply, which is big in Nashville. What I loved is that they did everything together. Super collaborative, lots of conversations, respectful, and very driven to create success in an entrepreneurial environment. I couldn’t agree more: the leaner the team, often the more quickly you can succeed. But if you’re going to take it to the next level, you have to learn to scale, and that’s not easy.
What Makes Fortress Different
Gordon Lamphere: I recently attended a conference where the author of the book Range spoke, about how a world of hyper-specialization within individuals on teams isn’t conducive to meeting today’s demands. It’s fascinating to hear about a group with such a wide range of backgrounds. That leads into what makes Fortress unique. It seems to be built around the idea of a holistic property technology system. Can you talk about what a holistic, broad-range platform really means?
Kerri Davis: I haven’t read that book, though now I’m interested. You mentioned hyper-focus in specialized areas to create success, and I talk about this all the time with my team: identify someone’s strengths and leverage the heck out of them. I’m not focused on fixing my team members’ weaknesses. We work on them if needed, but you focus on strengths, find what they’re really good at, and let them specialize and dive deep. That works so well for my team, and it’s a very similar structure for Fortress.
Fortress is a core operating software. We don’t integrate with RealPage, Yardi, or MRI. We replace them. That’s sometimes hard for people to process, because those legacy systems are so massive and have been around so long. The trick to our success is that we focused on what we knew we could do really well: operations, front end and back end. Everything around your rent roll, floor plans, units, buildings, market rents, residents, their documents, their ledgers. It goes as far on one side as guest cards and ILS syndication, and on the other side to managing work orders, final account statements, and move-outs. What we didn’t do is create an accounting system. Fortress manages ledgers, sub-ledgers, security deposits, transaction codes, payments, and is the source of truth for your income, but we didn’t feel the need to redo what’s already been done really well by the massive accounting ERPs. Tons of industries have done this for years: an operating software for expenses or income, with those transactions flowing into a larger ERP to produce robust financial statements and manage bank reconciliations and cash. We asked ourselves what we could do really damn well, and we focused on that. We did operations, and we integrate with the accounting system of your choice, whether that’s QuickBooks for a smaller system or Sage Intacct or Microsoft Dynamics. Where we’re not going to try to be the best at everything, we integrate: credit and criminal screening groups like TransUnion, the accounting groups, syndication to the ILSs, SEO-focused website builders, facilities management solutions, and lead management platforms like Funnel. That’s the strategy: specialize and do what we do really well. So the book you brought up really applies to Fortress.
Gordon Lamphere: What does being really good at management mean? People talk about great management teams. What does that dive into?
Kerri Davis: First and foremost, usability. The ability to open Fortress and use it for the first time, just like pulling your iPhone out of the box. It’s the next step in property management, putting the BlackBerry down and picking up the iPhone. For us, that includes centralization, automation, a lot of prompting in the system to tell people what to focus on and look at next, and giving users access to real-time BI and information about how their assets are performing.
Gordon Lamphere: One of the biggest things we raise with proptech guests is that the decision makers often aren’t millennials who know how to code. They’re boomers or Gen Xers without that tech background. How do you make Fortress work for people who are less tech savvy?
Kerri Davis: That’s exactly where we started. When I was asked to step in and scale a struggling property management company, my first step was identifying that there was a piece of technology that could and should have been touching everyone involved in the success of the asset, and it wasn’t, because leadership, ownership, and asset managers weren’t in the software day to day. They had no reason to be, because it was so difficult and cumbersome to use, and there was no real-time BI. So I started there. If we want this tool to be insanely valuable for owners and asset managers and helpful in identifying opportunities to generate more success, we need usability and transparency that gets owners and asset managers into the software. We set about creating overview screens with all that data and incredibly easy ways to drill down so you can understand what’s happening and immediately impact the success of the asset. It’s been flattering, because so many referrals have come from asset managers who are in Fortress regularly. If you create a system as easy to use as the iPhone sitting next to you that you get anxious about when you can’t find it, you’ll get asset managers and ownership into the system. And if leadership is using the platform, on-site teams and mid-level management absolutely adopt it and put the information in.
Reduce On-Site Payroll, Reward Overachievers
Gordon Lamphere: You’re an accountant by trade. You mentioned finding opportunities to improve an asset. What are the key things property managers should look for, on the platform or in general, to improve value and returns?
Kerri Davis: My answer is going to sound unpopular at first. I’m known for generating a little conflict, but I truly believe in it. We need to reduce payroll on site, and we can do that while paying the overachievers more. Hear me out. If you can centralize the day-to-day tasks that don’t have to be done by someone sitting in an on-site office, things like collections, renewals, and final account statement processing, you allow people to specialize, use their strengths, become overachievers, earn more, and be happier and more fulfilled, while reducing your on-site payroll expense. You also free up funds to hire someone at a higher level who globally oversees three or four assets in more of a management role, not a regional leadership role, and you can pay that person really well. Net net, I firmly believe it adds value to the asset and extreme value to human beings, which I’m passionate about. So yes, I say reduce payroll and eliminate some positions, and I truly believe the end result benefits everyone, especially the people. I tell my team all the time that the only way to reward your overachievers is by not burdening them with underachievers. The way you get there in property management is through specialization, which we don’t have today with inherently decentralized teams.
Gordon Lamphere: To get to that level of specialization, you have to get to scale, and you’ve said there are a lot of growing pains. What are the biggest growing pains you’ve seen as companies scale?
Kerri Davis: Such a great question, and for me it goes back to culture. When you add a lot of people, it inherently changes the culture. Culture isn’t swag or pizza parties or how good your PTO is. Culture is defined and created by the people you hire. As you scale, that culture changes. It has to. You’re adding people who bring different experiences. Juggling that change while still holding a really high standard for everyone, being intentional that team members coming in are worthy of your team, is the challenge. It’s okay to change the culture, but keep holding people to a high standard, and again, reward your overachievers by not burdening them with underachievers. That’s hard as you scale, especially as you add positions you didn’t have before, because determining what success looks like for that position takes time. It’s about being really intentional.
Misconceptions About Proptech
Gordon Lamphere: We’re bringing on two recruiters later this month to talk more about this, so I won’t burden you with more HR. Let’s go to something you’re a specialist in, holistic property technology. There are a lot of misconceptions about proptech. What’s the biggest one your standard agent or investor has?
Kerri Davis: Probably that property management software is easy to use in a way that gives investors, owners, and analysts access to data, which everyone needs, without a lot of money or time. If we all understood how much we don’t have access to that data, hopefully there’d be a bigger push to get it. There’s also a misconception that converting property management software is the end of the world. It’s not.
Gordon Lamphere: It does seem like the apocalypse to folks at the organization sometimes.
Kerri Davis: It does. But like everything in life, it’s short-term pain for long-term gain. People think, I have all this data and I’ll lose it if I convert. Well, I’ve got news: you don’t have access to your data now unless you’re paying a ton of money for it. Wouldn’t it be nice to have real access to your data long term without paying for it? I’d add one more misconception: that all these awesome point solutions will solve all your problems. There are so many ancillary solutions, lead management, CRM, resident apps, tour scheduling apps, the list goes on. You think that because they’re great at what they do, they’ll solve all your problems and create a better experience for everyone. The problem is that having all those systems inherently creates more problems. I met this week with a company north of 10,000 units using four different point solutions with four different calendars that won’t sync, which means their on-site teams log into four calendars every single day. Obviously that causes missed appointments and issues. The idea that point solutions will magically solve our problems is a huge misconception in technology right now.
Gordon Lamphere: I couldn’t agree more. You build a tech stack and it quickly becomes the Leaning Tower of Pisa, with a calendar issue or an API integration slightly wrong, and next thing you know you’ve missed the meeting with your biggest client. One more follow-up: you mentioned decentralization. Can you talk about how Fortress and the groups you’ve worked with have approached the management of their holdings?
From Decentralized to Centralized
Kerri Davis: Property management today is inherently decentralized, because we have insular assets located geographically apart from each other. That’s a physical constraint. It creates a lot of problems when you’re trying to staff a property with people who can sell, collect, renew, manage resident events, and be experienced in HR, fair housing, and facilities management. The list of expectations for the person or team in that office goes on and on. From a budget standpoint, each asset supports maybe one manager and one person in the leasing office. So you’re asking them to be experts in all these fields. Not just asking, telling, because if you violate fair housing, that’s not a small thing.
Gordon Lamphere: That’s serious money and a real no bueno for the world.
Kerri Davis: Exactly. They have to be experts in all these areas, and that’s not real life. So we’ve taken it another level, removing as many of those random pockets of required expertise from that person as we can and putting those responsibilities on specialists in the corporate office. We’re moving from decentralized to centralized in a few areas: collections, SEO and marketing management, and we’re looking at renewals, which a couple of groups are doing really well right now. A shout-out to Alex O’Brien and his team at Cardinal, who are taking this to a whole other level, well beyond what Elmington Property Management is doing. For third-party fee managers, it’s a bigger challenge, because clients are used to having payroll on their sites. When they start paying for payroll in your centralized office, they ask, how do I know the time I’m paying for is really my time, since they’re not on my site? You have to work through that with clients, and it has to be a true partnership. But the more you take off your on-site teams and stop expecting them to be brilliant in so many buckets, the more success you’ll have.
The Final Four
Gordon Lamphere: Great advice. The only sad thing is we’re at the end, so we’re moving to our Final Four, four questions that dive into who you are and a little more about the industry. First, a favorite of mine: where do you see commercial real estate ten years from now?
Kerri Davis: I love this question, and I’ll start with the unpopular thing again. I don’t think we’ll have people on site. I’d love to see a world where both leasing and maintenance, anything that physically requires being on site, is done through a DoorDash-type experience. You need a maintenance tech, you have a team, or maybe they’re all contractors, they have an app, they get dispatched on work orders, and you pay a flat rate per work order. That’s someone motivated to optimize their time, because they’re paid by the job, not the hour. Same with leasing. We have so many fantastic real estate agents who don’t have enough to do because of interest rates, and that sucks for them. They’d be amazing at leasing apartments. Imagine an app where they could be dispatched to lease apartments for us, optimizing their time, not paid by the hour. It could be insanely beneficial on both sides. I also think, and this may not be popular either, that unless the ILSs change what they’re doing and how, I don’t see a future for them as they exist today. Websites and SEO are insanely more valuable for qualified lead generation, and putting your money into SEO is so much more valuable than putting it into an ILS.
Gordon Lamphere: We don’t only look forward, we also look back. Kerri, what would you tell yourself coming out of high school if you had a minute or two?
Kerri Davis: Oh goodness, this will share a lot about me personally. I’d say, calm down. It’s going to be okay. I’ve always been incredibly passionate and driven and, honestly, quite angsty. The pandemic cured that for me when I took up meditation heavily, and it changed who I am. Taking a step back to breathe, taking that pause, and realizing that whatever seems so big right now won’t be nearly as big in the morning, and you probably won’t remember it in two weeks. So calm down.
Gordon Lamphere: In turbulent times, taking a break, or the pause as the French call it, is sometimes the greatest thing we can do. There are times to think quickly, but many times we have to think slowly and relax. One way I relax is with a book. Is there a book that’s influenced you in your career that you’d recommend?
Kerri Davis: Yes, and I might get judged for it if people go read it. The book that was with me at the very beginning of my meditation journey is The Surrender Experiment. Have you heard of it?
Gordon Lamphere: No, but I’m interested.
Kerri Davis: Now you’ll read it and think I’m crazy granola. I’m a little bit, not too far. It’s about a man’s experience with life, essentially saying yes to every opportunity that came his way. There are moments where you’ll roll your eyes and think it’s a little ridiculous, and it does get over the top. But the general thesis, saying yes to opportunities and not fighting everything, taking that breath and that pause and allowing things to unfold, can create incredible success when that’s not even what you were trying to do. It’s a unique book about life, and it’s been impactful for me.
Gordon Lamphere: That sounds like a great book. Our final question is the whole reason we started the podcast: finding interesting individuals influencing the real estate world like yourself. Who should be the next person on the podcast?
Kerri Davis: Based on the conversation we’ve had today, I’d recommend Alex O’Brien. He’s a fascinating person and can really expand on a lot of what we’ve discussed.
Gordon Lamphere: Thank you so much for hopping on the podcast today. One final question: what’s the best way for folks to get in touch with you?
Kerri Davis: Our website has all our information, and I’m happy to connect directly on LinkedIn. I monitor my LinkedIn messages quite a bit. The website is fortresstech.io. Thank you.
Gordon Lamphere: Kerri, thank you so much for hopping on today, and we’ll have to have you on again in the future.
Kerri Davis: Thank you so much, Gordon. It was a great time. I appreciate it.
Gordon Lamphere: Thanks again to Kerri. We appreciate her insights. If you enjoyed the podcast, please give us a like, a five-star rating, or a review. Your comments, interactions, and subscriptions truly matter and help us continue to provide quality guests. You can follow us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere with the Real Finds Podcast. Thank you for listening.
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